Loss of Bill of Lading
Two situations will arise when a set of Bill of Lading has been reported missing and cannot not be traced.
The carrier has to consider:
- Issuing a replacement set, especially in situation of loss involving negotiable Bill of Lading.
- Delivery of the goods without collection of an original Bill of Lading.
A negotiable Bill of Lading is a document of title, therefore, any replacement should be considered with extreme care as there is always the danger of two original sets in circulation when a replacement set is issued and consequently causing complications. A party holding to a Bill of Lading acquired in good faith is entitled to the delivery of the goods and with two sets of Bills of Lading, there will be a possibility of two different parties claiming for the goods and that will expose the carrier to a claim by one of these parties. If the shipper has not been paid, he can demand the right to the disposal of the goods. In reality, the carrier will not know if the Bill of Lading is indeed lost or simply misplaced and re-surface without being returned to the carrier.
When a Bill of Lading is lost, it is not uncommon to see advertisement of the loss with the intention to nullify the original Bill of Lading that has been lost and/or a police report filed. By doing so, the carrier may deem it appropriate to issue a replacement set or may proceed to release the goods without an original Bill of Lading with a support of a suitable security. Will the advertisement provide the carrier with the necessary protection? The answer is: most likely it will not. There is no value in a police report if the matter is simply a commercial contractual transaction and if there is no fraud, the police authority will not be involved. A holder of the lost Bill of Lading may be an innocent party acquiring the goods in good faith and will reasonably be accepted to have failed to see the advertisement. Similarly, the claim can involve an unpaid seller (as in the case of loss of Bill of Lading reported by the consignee).
Instead of issuing a replacement set, the situation where delivery is to be granted without collection of an original Bill of Lading is just as risky. The general position is that an original Bill of Lading has to be presented for collection of goods and the failure to do so will result in the risk of carrier facing a potential claim from the valid holder of the Bill of Lading. Many cases have been decided pointing to the need of obtaining proper security when delivering goods without Bill of Lading.
A simple letter of indemnity from shipper or consignee or both parties is just as good as the paper value of the commitment if the party has no financial means to indemnify the carrier when a valid claim surfaces. Where the situation is referred to the insurer of the carrier, it is invariably a requirement that such delivery be supported by a letter of indemnity and accompanied by a proper bank guarantee – that is the provider of the indemnity has included a similar commitment from a financial institution which could be a bank or insurance company of adequate standing.
Certain features must be covered in the letter of indemnity and guarantee:
- An undertaking value which should not be the value of the goods only.
- The indemnity should cover all claims and costs.
- Binding for as long as the validity of a claim that may arise from the underlying lost Bill of Lading. – Be cautious by not simply following the time bar period of the Bill of Lading; review the circumstances of the case.
- A proper jurisdiction clause setting out the law applicable for the enforcement of the indemnity letter and guarantee.
The security conditions suggested for delivery of goods without Bill of Lading should also be considered when issuing a replacement Bill of Lading. In all circumstances, it is always prudent to check with the shipper whether payment of the goods has been received.
Note – please seek professional advice with regard to the above situations. This article is not intended to replace professional advice.
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